There are five types of insurance every person needs and should have:
- Life Insurance
- Health Insurance
- Homeowners or rental insurance
- Car insurance
- Disability Insurance
Life insurance is a type of insurance every person needs and should have.
Life insurance is an income replacement policy. The life insurance policy is generally purchased in an amount to guarantee a specific amount of income for a specific amount of time. You can get a life insurance policy for a term period. For example, you can get a 10 year term life insurance policy, a 15 year term life insurance policy, or a 30 year and more life insurance policy. There are a number of different terms available. The buyer determines how long he or she wants to ensure payments in the event of their death.
Every person needs and should have life insurance especially if you have children. In the event that you die you will want to ensure that your child(ren) and spouse have the same monetary contributions you made in life while in death. The rule of thumb is that your life insurance should be about 10 times your income. Mine was five times because I also had my pension and 401(k).
Health insurance is a medical type of insurance every person needs and should have because lack of health insurance is the primary reason for bankruptcy.
There is no free health insurance in America. Health insurance is expensive. However, it is a necessary expense we cannot ignore. Health insurance is a cost sharing tool. The client (us) shares the cost of our premiums with our employer or with the government. Health insurance is a type of insurance everyone needs because medical procedures are expensive. Being seen by doctors and specialists can rack up a lot of debt. Unpaid medical debt can lead to bankruptcy. The biggest cause of bankruptcy is medical debt.
Homeowners or Renters Insurance is another type of insurance every person should have because you don’t want to pay for any theft or damage done to your home with your own money.
Similar to life insurance, homeowners and renters insurance is replacement insurance. Homeowners insurance not only covers the items inside of a home but also the costs to rebuild the home if the home is destroyed. On the other hand, renters insurance only covers your personal items that are inside of your home. If you own a condo, you can get renters insurance because the complex already has insurance to cover the buildings.
Car owners know the importance of having insurance especially if your car has been in an accident or stolen.
Car insurance is another type of insurance every person needs and should have. First, it is illegal to drive without insurance. Second, if you get into an accident how will you pay for another car? Most people do not have $15,000 to $20,000 in their account to buy another car. Also, if you have a loan on the car you are mandated by the creditor to have and keep insurance on the car. If you do not have car insurance on the vehicle and it is damaged or destroyed, you are still obligated to make those loan payments.
Lastly, disability policies provide income during an employee’s illness. A short term disability policy covers 40% to 60% of income. It lasts from 9 to 52 weeks. On the other hand, long term disability policies generally pay out until you are 65 years old. They cover about 50% to 60% of your salary.
In essence, these are the five types of insurance you should have. Don’t let the costs of the premiums dissuade you from buying them. It’s cheaper on the front end than the back end to have this insurance.